Re Portsmouth City Football Club Ltd; Neumans LLP v Andronikou and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 02 November 2012 |
| Neutral Citation | [2012] EWHC 3088 (Ch) |
| Docket Number | Case No: 22180 of 2009 |
| Court | Chancery Division |
| Date | 02 November 2012 |
[2012] EWHC 3088 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
COMPANIES COURT
Rolls Building,
7 Rolls Building,
Fetter Lane, London,
EC4A 1NL
Mr Justice Morgan
Case No: 22180 of 2009
In The Matter of Portsmouth City Football Club Ltd (in liquidation)
And In The Matter of the Insolvency Act 1986
and
Mr Richard Snowden QC and Mr Alex Barden (instructed by Neumans LLP) for the Applicants
Ms Hilary Stonefrost (instructed by Walker Morris) for the Administrators
The Liquidators did not appear and were not represented
Hearing dates: 10, 11 May and 12 October 2012
| HEADING | PARAGRAPH NUMBER |
| PART I: THE FACTS AND OTHER MATTERS | 1 |
| Introduction | 1 |
| The insolvency processes in this case | 3 |
| The application | 9 |
| The provisions relevant to the liquidation | 17 |
| The provisions relevant to the administration | 25 |
| The submissions for the solicitors | 35 |
| The submissions for the administrators | 40 |
| PART II: ADMINISTRATION EXPENSES | 44 |
| Introduction | 44 |
| Senior Courts Act 1981, section 51 | 51 |
| "Treating" the fees as an administration expense | 85 |
| Powers and directions | 99 |
| PART III: CVA EXPENSES | 111 |
| PART III: LIQUIDATION EXPENSES | 113 |
| PART IV: THE OVERALL RESULT | 137 |
PART I: THE FACTS AND OTHER MATTERS
Introduction
This application arises out of the insolvency of Portsmouth City Football Club Ltd, company number 03742737 ("the company"), which is not to be confused with Portsmouth City Football Club (2010) Ltd. The application is brought by a firm of solicitors, Neumans LLP ("the solicitors"). The principal relief sought by the solicitors is a determination that certain fees and disbursements, said to be payable by the company to the solicitors for work done by them on behalf of the company, in the period from 15 th December 2009 to 12 th February 2010, should be determined to be an expense of the administration of the company; that administration lasted from 26 th February 2010 to 24 th February 2011. Alternatively, the solicitors say that those fees and disbursements should be an expense of the liquidation of the company, which was ordered to be wound-up on 24 th February 2011, pursuant to a petition presented on 23 rd December 2009. In the further alternative, the solicitors say that those fees and disbursements should be an expense of a CVA which the company entered into while it was in administration. Although the sums in question are not confined to the fees chargeable by the solicitors for their work but also include substantial disbursements in relation to counsel, I will for convenience refer to the sums in question as "the solicitors' fees", save where it is relevant to refer to both fees and disbursements.
Mr Snowden QC and Mr Barden appeared on behalf of the solicitors and Ms Stonefrost appeared on behalf of the administrators. The administration came to an end on 24 th February 2011 but it is convenient to refer to the administrators by that description both when referring to their position during the administration and after it. The liquidators did not appear and were not represented. Counsel's submissions were elaborate and thorough and I fear that in order to do justice to them I need to explain my reasons at what has become considerable length.
The insolvency processes in this case
On or about 15 th December 2009, the company instructed the solicitors to act for it in connection with a threatened winding up petition which was expected to be presented by HM Revenue and Customs ("HMRC"). On 23 rd December 2009, HMRC did present a creditor's petition for the winding up of the company. On 12 th January 2010, the company issued an application notice in the Companies Court seeking, principally, an order that the petition be dismissed as an abuse of the process of the court. That application was heard by Newey J on 15 th and 18 th January 2010 and dismissed by him on 19 th January 2010. His judgment is reported at [2011] STC 683. Newey J granted the company permission to appeal to the Court of Appeal and an Appellant's Notice was filed on 3 rd February 2010. The solicitors acted for the company in connection with the company's application to the Companies Court and the appeal to the Court of Appeal and continued to act for the company until on or about 12 th February 2010, when their instructions were withdrawn. The appeal to the Court of Appeal was overtaken by later events.
On 26 th February 2010, by an out of court appointment pursuant to Insolvency Act 1986 ("the 1986 Act"), schedule B1, para. 14, a qualifying floating charge holder appointed administrators of the company. The winding up petition was automatically suspended while the company was in administration pursuant to the 1986 Act, schedule B1 para. 40(1)(b).
HMRC initially raised an issue as to the validity of the appointment of the administrators. On 2 nd March 2010, HMRC's winding up petition was heard. Directions were given for the determination of the issue whether the administrators had been validly appointed. Not long afterwards, HMRC accepted that the administrators had been validly appointed.
The administrators' initial report of 19 th April 2010 proposed a company voluntary arrangement. The administrators' proposals were approved at a meeting on 17 th June 2010. The terms of the CVA provided for it to cease to have effect on 16 th February 2011 unless extended, or earlier than 16 th February 2011 if the company were wound-up. The supervisors of the CVA were the administrators.
HMRC challenged the CVA on the grounds that it unfairly prejudiced its interests and that there was a material irregularity in respect of voting by the creditors. That challenge was rejected by Mann J on 5 th August 2010. The neutral citation of his judgment is [2010] EWHC 2013 (Ch).
On 26 th November 2010, the administrators made revised proposals. In particular they proposed a meeting to consider ending the administration via a compulsory liquidation. On 14 th December 2010, the creditors met and approved resolutions that the company should exit administration via a compulsory liquidation. On 28 th January 2011, the administrators applied under the 1986 Act, schedule B1, para. 79 to bring the administration to an end on or before the anniversary of their appointment (25 th February 2011). That application was heard on 10 th February 2011 when it was ordered that the administration should cease to have effect pursuant to schedule B1, para. 79 on the court making an order to wind up the company. The original winding up petition which had been presented by HMRC was restored to a hearing on 24 th February 2011 when Norris J made an order winding up the company. The result was that the administration ended on the making of that order. The liquidators were appointed on 25 th February 2011.
The application
The application before me arises out of the fact that the company did not pay the solicitors all of their fees for the work which they did for the company in the period from 15 th December 2009 to 12 th February 2010. The total sum now identified by the solicitors in relation to their fees (and disbursements) amounts to £462,599.21. The solicitors' own fees are £214,859.10. The disbursements are in respect of the fees of leading counsel and two junior counsel. Before 12 th February 2010, the solicitors were paid £160,000 by a person connected with the company. The bulk of this money was used to make payments to counsel. In addition two of the counsel have written off part of their fees. The solicitors say that the sum outstanding which they wish to claim as an expense of the administration or the liquidation or the CVA is £267,079.45. In case the level of the fees for acting in the period from 15 th December 2009 to 12 th February 2010 might be considered to be on the high side, Mr Snowden stressed that the solicitors' fees and disbursements could be the subject of a detailed assessment, as between solicitor and client, if they were not agreed. On 26 th February 2010, shortly after the appointment of the administrators, the solicitors wrote to the administrators seeking payment of their fees and disbursements as an expense of the administration.
As indicated above, HMRC's winding up petition was heard on 2 nd March 2010. At that hearing, the court granted the solicitors liberty to apply in relation to their fees. On 8 th March 2010, the solicitors wrote to the solicitors acting for the administrators setting out their arguments as to why their fees and disbursements should be paid as an expense of the administration. On 12 th March 2010, the solicitors for the administrators replied to the solicitors indicating that on any application by the solicitors to the court, the administrators would not be unsympathetic to the solicitors' position but that such an application was premature until the question as to the suspension of the winding up petition was considered at a future hearing. As indicated above, around this time, HMRC accepted that the administrators had been validly appointed and it automatically followed that the winding up petition was suspended.
Time went by and further correspondence passed between the solicitors and the administrators. On 13 th August 2010, the administrators called on the solicitors to make any application they wished to make for a determination that their fees and disbursements should be an expense of the administration. On 27 th August 2010, the solicitors issued...
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